We need a 'third class of worker' for people like Lyft and Uber drivers, says investor

Instacart employees are just one example of the 1099
working class.Instacart

There's a war brewing over what to call the Uber and Lyft drivers
in this world, and "employee" might not be the answer.

"I think it's not 1099 versus W-2. I think the right answer is a
third class of worker," said Simon Rothman, a partner at Greylock
and an investor in Sprig, which uses 1099 employees. "People
are now becoming one-person companies, and they're not even
working for one entity."

The new economic model championed by the on-demand economy relies
on a steady stream of
1099 contract workers. They are called 1099 workers because
of the IRS tax form "1099 MISC" that they fill out when hired,
compared to the traditional W2 that full-time employees complete.

It's a business model that's being contested in court after
Boston labor rights attorney Shannon
Liss-Riordan sued Uber and Lyft.

While Rothman acknowledged that it is likely going to be the W-2
that wins out, it is still "fundamentally wrong," he said on a
panel at the grand opening of Shift's new
offices.

Rothman's argument centered around the fact that many of the 1099
contractors don't have loyalty
to a singular company and are instead becoming one-person
companies by working for several platforms.

The 2015 1099 Economy Workforce Report found that
38 percent of the on-demand workers are signed on to multiple
companies at once while 13 percent said they switched companies
to try to leverage the sign-up bonuses. REUTERS/Stephen Lam

If you unbundle benefits from companies or substitute them on a
pro-rata basis, that's when you can create a new flexible labor
class that matches how the delivery drivers or house cleaners of
the on-demand economy see their jobs, Rothman said. He would love
to see companies start personalized healthcare that travels with
you and not dependent on your employer.

"I think this new class of worker has to reflect this new type of
work that's being done," Rothman said. "If you decouple the
benefits, if you decouple the pension so it's not tied with you,
think about the control you can have, going out of the networks
as you wish, controlling the what and when of your job."

Rothman is not the only person thinking about the third labor
class either. In Germany, as Shift's founder George Arison noted
on the panel,
there is already a third class of "dependent
contractors".

Even in the Lyft case, U.S.
District Judge Vince Chhabria said
in a March decision that he's not sure if Lyft drivers
fit in either category of California's "outdated" employment
codes.

“The jury in this case will be
handed a square peg and asked to choose between two round holes,”
he wrote. “The test the California courts have developed over the
20th Century for classifying workers isn’t very helpful in
addressing this 21st Century problem.”

Rothman also saw it as an evolution of the labor system.

"What's happened over the last
generation is that you no longer have one career with one
employer, but you expect to have one employer at a time," Rothman
said. "Why can't you work for 5 platforms, or 50 platforms at a
time?"